Nautilus Faces 36 Percent Loss, Possible Sale of Commercial Business

VANCOUVER, WA -- As Nautilus Inc. reported a loss of 36.4 percent in net sales for the second quarter 2009, Ed Bramson, chairman and CEO of Nautilus, disclosed that the company is considering a possible sale of its commercial fitness business.

For the quarter ended June 30, 2009, Nautilus reported net sales of $60.8 million, compared to net sales of $95.6 million for the second quarter 2008.

On an operating basis, the retail and direct businesses were profitable while the commercial business recorded a loss for the quarter. The retail business generated $1.2 million in income from operations compared to a loss of $0.2 million for the previous year period. The direct business generated $0.6 million of income from operations compared to a loss of $0.6 million in the same period last year.

The commercial business had a loss from continuing operations of $7.2 million in the second quarter of 2009 compared to a loss of $1.1 million for the same period last year.

The lower commercial sales primarily resulted from lower gross margins because of discounting, which the company engaged in to sell excess and discontinued inventory, Bramson said.

Bramson announced that the company is considering a strategic change to focus its efforts on a consumer-only business model, which could mean the sale of its commercial business.

“In order to refocus our business model and operations, the company is considering streamlining its activities to place greater emphasis on its direct-to-consumer and retail businesses, and thus will be evaluating the strategic long-term alternatives for the commercial business,” Bramson said in a statement from the company. “While recent results did not meet expectations, we continue to believe that Nautilus Commercial provides an attractive and under-exploited asset in the commercial fitness equipment market.”

Nautilus has engaged Robert W. Baird & Co. to assist in evaluating strategic alternatives for the commercial business. Bramson expects the review of potential alternatives will take a number of months.

“In the meantime, we will continue to look for ways to reduce costs through restructuring that will allow the commercial business to improve on recent results,” Bramson says.